Cisco Systems Plays The Field


Cisco Systems Plays The Field

By Shannon Henry

Michael Carpenter photo
Cisco's Paul Cantwell

As colossal Cisco Systems Inc. embarks on a highly visible global systems integration strategy, company officials will take their cue from the promiscuous partnering of its government unit.

Cisco Federal in Herndon, Va., makes a whopping 92 percent of its revenue through its 400 and counting integrator partners.

If the whole corporation, which in 1996 reaped $4.1 billion in revenues, follows that lead, San Jose, Calif.-based Cisco could well become the No. 1 customer for systems integrators.

Paul Cantwell, Cisco's director of federal government channels, said the federal division will announce significant new partnerships with three integrators over the next few months as it steps up its integration strategy even more.

The imminent partnerships are aimed at expanding Cisco's reputation as a General Services Administration schedule player. Cisco is a pre-eminent developer of technology products such as routers and switches that are used by companies worldwide to shuttle data around communications networks.

"[Cisco CEO John] Chambers says the next phase of growth for Cisco will be supported by global systems integrators," Cantwell said. "Integrators are critical to our success."

Simply put, the integrator needs Cisco for its name and high-quality hardware. Cisco needs the
integrator to put together the whole network and make it work. "One relies on the other," said Cantwell, who joined Cisco four months ago after cutting his teeth on jobs at Digital Equipment Corp. in Maynard, Mass., Sysorex International Inc. of Mountain View, Calif., and Chantilly, Va.-based Government Technology Services Inc.

"Cisco is a marquee name," agreed Douglas Schmidt, managing director of corporate finance at Legg Mason Wood Walker Inc. in Baltimore. "Clearly, if you have any systems integration or networking capability and you're selling Cisco, you're getting good margin service work," he said.

The Cisco federal partnering strategy has been fired up lately by new technologies tied to the Internet and increasing demand in voice and data communications. "The network has become such an important part of the government," Cantwell said.

Cisco will form a joint venture with just about any company that its customers want. Integrator partners range from Plano, Texas-based Electronic Data Systems and Unisys Corp. in Blue Bell, Pa., to telcos AT&T in Basking Ridge, N.J., and Sprint of Kansas City, Mo., to distributors such as Chantilly, Va.-based Comstor and Tech Data Corp. in Clearwater, Fla.

If the customer wants a huge global integrator that's fine; if it wants a regional company, that's available, too. In the federal market alone, Cisco has about 400 partners.

"Ride around the Beltway and write down every company that has three letters and we're doing business with them," said Cantwell. "We're not fickle."

The alliance strategy is indicative of current business trends, especially toward outsourcing. Few companies are trying to do it all. "Industry wants to stick to what it does really well," Cantwell said. "The market is demanding it."

One company buoyed by its relationship with Cisco is OAO International of Greenbelt, Md., which has made $14 million in sales through partnering over the past four months, according to Bob Lohfeld, senior vice president at OAO. "It's been a phenomenal success for us," said Lohfeld, who buys Cisco products through a systems integration agreement. "It was a love-in with Cisco."

OAO is the fastest growing partner in the systems integration market for Cisco, and hopes to be the No. 1 reseller for Cisco in the government market by next year,
Lohfeld said.

OAO, which does about half of its business in the government market, is building an "enterprise" integration service through partnerships, Lohfeld said. Recent picks are Lucent Technologies in Murray Hill, N.J., Sun Microsystems Inc. of Mountain View, Calif., and IBM Corp. of Armonk, N.Y., as well as Cisco.

Some industry watchers have speculated that Cisco's emphasis on the systems integration market might mean it's looking to buy or merge with an integrator. But Bob Michelet, director of corporate relations at Cisco, said the company does not intend to actually become a systems integrator.

Cisco has it pretty good now without owning the integrator part of its offerings. "It doesn't pay to set up your own distribution channel," said Legg Mason's Schmidt, "when your customers are your integrators."

While Cantwell declined to list top integrator partners by revenue, Cisco posts its "Gold Partners" list on its corporate Web site. Of 66 total worldwide, 11 gold partners are U.S. companies, including NCR, Bell Atlantic Network Integration, GTE, Hewlett-Packard and Pacific Bell Network Integration. Companies get Cisco's gold star for developing "expertise in virtually every aspect of Cisco's business, including sales, support, network design, network management and global networking."

The federal unit's pending systems integration partnerships will be patterned after an April alliance with government integrator ViON Corp. of Washington. ViON is supplying Cisco equipment and software on the GSA schedule. ViON integrates mainframes and TCP/IP networks and Cisco provides the routers, servers and software that make up the puzzle.

Cisco's Five Categories of Allies
  • Nationwide systems integrators such as EDS, Unisys and AT&T
  • Regionally based system integrators such as Native American Sales, Force3 and Worldwide Technologies
  • Telecommunications providers such as Bell Atlantic, MCI and Sprint
  • Distributors such as Comstor, Tech Data and Ingram Micro
  • GSA partners such as Sylvest, BTG and Pulsar

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